How 2026 Tariffs Are Raising Construction Costs and What Contractors Can Do About It

If you have submitted a bid in the last six months and found your material quotes coming back higher than expected, you are not imagining it. Steel mill products are up 20.7 percent year over year. Aluminum mill shapes are up 33 percent. Copper and brass products are up 15.7 percent. These are not market fluctuations. These are the direct result of federal tariff policy, and according to the Associated General Contractors of America, they are the largest year-over-year material cost increases since the supply chain disruptions of 2022.

For general contractors, plumbing and mechanical subcontractors, electrical contractors, and anyone whose work relies on steel, aluminum, copper, or lumber, 2026 is a year where inaccurate estimating does not just hurt your margin. It can turn a contract into a loss before the first crew sets foot on site.

This post explains what is happening with tariffs right now, which materials are affected, how much costs have moved, and what practical steps contractors and developers can take to protect themselves.

What Tariffs Are Currently in Effect

The current tariff situation affecting construction materials in the United States as of early 2026 is as follows.

Steel and aluminum: A 50 percent tariff under Section 232 applies to all steel and aluminum imports into the United States. This rate was increased to 50 percent in June 2025, following an earlier increase to 25 percent in March 2025. The expanded derivatives coverage introduced in 2025 remains in effect, meaning the tariff applies not just to raw steel and aluminum but to fabricated products made from these materials.

Copper: A 50 percent tariff on semi-finished copper products and copper derivatives took effect on August 1, 2025. The producer price index for copper and brass mill shapes rose 15.7 percent year over year in January 2026.

Softwood lumber and timber: A 10 percent tariff applies to softwood lumber, with various lumber and timber derivatives subject to a 25 percent tariff. Canada, which was previously the largest exporter of softwood lumber to the US, is subject to these tariffs.

Global tariff: A 10 percent time-limited tariff covering most imports from countries not subject to higher specific tariffs is in effect until July 2026.

The combined effect of these tariffs is significant. According to Associated Builders and Contractors, using Bureau of Labor Statistics data, nonresidential construction input prices rose at a 7.1 percent annualized rate in January 2026. The ENR Building Cost Index is up 4.2 percent year over year. And 43 percent of contractors surveyed by AGC and NCCER reported at least one project in the past six months had been cancelled, postponed, or scaled back because of higher material costs.

Which Construction Trades Are Hit Hardest

Not every trade is equally exposed. The tariff impact depends on how much of your material cost comes from steel, aluminum, copper, or imported lumber.

Structural steel and metal framing: This is the most heavily affected trade. Structural steel is priced by the ton and fabricated from domestic and imported steel. With Section 232 tariffs enabling domestic producers to push up their own prices alongside import prices, fabricated structural steel costs have risen significantly. For a mid-size commercial building with a structural steel frame, the steel package alone may have increased 15 to 25 percent compared to a project bid 18 months ago.

Mechanical and Plumbing: Copper piping for domestic water systems and medical gas systems is directly affected by the copper tariff. Mechanical contractors who use copper extensively on commercial and healthcare projects are seeing material quotes come back 15 to 20 percent higher on the piping portion of their scope. HVAC equipment that includes aluminum heat exchangers and copper refrigerant coils is also seeing price increases from manufacturers passing through higher input costs.

Electrical: Copper wire and cable is the single largest material cost in most electrical estimates. With copper up 15.7 percent year over year, an electrical contractor who has not updated their unit pricing in the last six months is likely bidding at rates that no longer reflect current supplier quotes. Aluminum wire, used in some feeder applications, is subject to the same 33 percent year-over-year aluminum price increase. 

Lumber and wood framing: Softwood lumber from Canada carries a 10 to 25 percent tariff depending on product classification. Framing contractors in residential and multi-family construction are seeing lumber material costs elevated compared to the 2023 and 2024 lows. The Random Lengths framing lumber composite, which fluctuates with supply and demand, is further affected by tariff-driven tightening of Canadian supply.

Roofing and metal panels: Aluminum roofing panels, metal standing seam roofing, and aluminum composite panels (ACM) used in commercial facades are all affected by the aluminum tariff. Roofing contractors and facade contractors who use metal products should be verifying current supplier pricing on every bid rather than relying on historical unit costs.

How Much Has This Added to a Typical Project Budget

The cost impact depends heavily on the project type and its material mix. Based on current tariff levels and material price data from Bureau of Labor Statistics Producer Price Index reports and AGC analysis, here are practical estimates of what tariffs have added to typical project types compared to costs from 18 months ago.

 Simple warehouse or industrial building: A pre-engineered metal building or tilt-up concrete warehouse with a steel roof structure and minimal MEP has a high proportion of steel in its total cost. Tariff-driven steel and aluminum price increases have added approximately 3 to 6 percent to the total construction cost of this building type.

Commercial office building with structural steel frame: Steel framing plus copper electrical and mechanical systems make this building type among the most tariff-exposed. Total cost increases attributable to tariff-affected materials are estimated at 5 to 9 percent compared to 18 months ago.

Multi-family residential (wood frame): Lumber tariffs plus copper electrical and plumbing are the main exposures. Total tariff-attributable cost increases for wood-framed multi-family construction are estimated at 3 to 5 percent compared to 18 months ago.

Healthcare facility: High copper content from medical gas piping, extensive MEP systems with copper and aluminum components, and structural steel in hospital additions make healthcare one of the more tariff-exposed building types. Tariff-attributable cost increases for a hospital addition are estimated at 6 to 10 percent compared to 18 months ago.

These are not small numbers. On a 20 million dollar commercial project, a 7 percent tariff-driven material cost increase represents 1.4 million dollars in additional budget requirement. If that budget was set from an estimate prepared 18 months ago and has not been updated, the owner is likely to discover a significant gap when bids come back.

What Contractors Can Do Right Now

There are practical steps contractors can take to protect themselves in this environment. The following are the most important ones.

Update your unit price database immediately: If your estimating software or cost database was last updated more than six months ago, the material unit prices for steel, aluminum, copper, and lumber are likely understated. Do not use historical database prices for these materials on current bids. Request current quotes from your suppliers for the specific products you will be buying. The difference between a database price and a current supplier quote for copper wire or structural steel can be 15 to 30 percent on some products.

Shorten your bid validity period: The standard bid validity period in many commercial contracts is 60 to 90 days. In a tariff-volatile environment, locking in a firm price for 90 days on materials that are moving week to week creates real risk. Consider shortening bid validity to 30 days for material-intensive scopes, or explicitly carving out the right to reprice if material costs move more than a specified percentage between bid and contract execution.

Add a tariff escalation clause to your contracts: The Associated General Contractors of America and Associated Builders and Contractors both provide model contract language for tariff escalation clauses. These clauses define what constitutes a tariff-related cost increase, specify the mechanism for recovery (change order, unit price adjustment, or shared cost formula), and integrate with existing force majeure and changes-in-law provisions. Contracts that do not have escalation language leave the contractor absorbing 100 percent of tariff-driven cost increases that occur after contract execution.

Lock in material pricing early in preconstruction: For projects where the contract allows it, purchasing structural steel, copper wire, aluminum panels, and other tariff-affected materials early in preconstruction rather than waiting until construction begins protects against further price increases. Larger contractors are already doing this. Many are locking in supply agreements months in advance and negotiating bulk pricing to stabilize costs before they submit a bid.

Communicate with owners and developers proactively: Owners who set their project budget based on an estimate from 18 months ago and have not been advised of the tariff-driven cost environment are going to be surprised when bids come back higher. The contractors who proactively communicate the cost environment during preconstruction, provide documented evidence of current supplier pricing, and set realistic budget expectations are the ones who get the call when the owner decides to move forward. The contractors who stay quiet until bid day and then hand the owner a number 15 percent above their budget lose the relationship along with the project.

How Accurate Estimating Protects You

In a stable material price environment, an estimate that is slightly off on unit pricing does not necessarily cause a problem. In the current environment, using outdated material pricing is a direct path to bidding below cost on tariff-affected materials.

The single most important thing a contractor can do to protect margins in 2026 is to get current estimates on every material-intensive scope. This means real supplier quotes, not database prices, for structural steel, copper wire and piping, aluminum products, and lumber on every significant project. It means updating your labor costs to reflect current trade labor rates, which have also increased in most markets due to persistent skilled trade shortages. And it means building a contingency into your estimate that accounts for the possibility of further tariff changes between the estimate date and the project completion date.

Professional estimating services that stay current with RSMeans data updates, monitor supplier pricing in your regional market, and understand how tariff changes affect material costs by trade and building type can be a practical solution for contractors who do not have the internal bandwidth to track all of these changes while also running their business.

Frequently Asked Questions 

Which construction materials are most affected by 2026 tariffs?

 Steel, aluminum, and copper are the three materials with the largest tariff-driven price increases in 2026. Steel mill products are up 20.7 percent year over year. Aluminum mill shapes are up 33 percent. Copper and brass mill shapes are up 15.7 percent. Softwood lumber carries a 10 to 25 percent tariff depending on product classification and origin.

How much have tariffs added to construction costs in 2026?

According to AGC analysis using Bureau of Labor Statistics data, nonresidential construction input prices rose 2.9 percent year over year in January 2026, with the annualized pace of increase running at 7.1 percent. The ENR Building Cost Index is up 4.2 percent year over year. Individual material categories have moved much more sharply, with aluminum up 33 percent and steel up 20.7 percent compared to January 2025.

What is a tariff escalation clause and does my contract need one?

A tariff escalation clause is contract language that allows a contractor to recover additional costs resulting from tariff-imposed price increases on specified materials, through mechanisms such as change orders, unit price adjustments, or shared cost formulas. In the current tariff environment, contracts for material-intensive commercial and industrial projects should include escalation language. AGC and ABC both provide model language for member contractors.

Are tariffs expected to go down in 2026?

Based on current policy, tariffs on steel, aluminum, and copper are expected to remain near current levels throughout 2026 absent extraordinary policy changes. The 10 percent global tariff is set to expire in July 2026, which may provide some relief on certain imported products. Trade negotiations with China, Canada, and Mexico remain ongoing and their outcomes will affect construction material costs if tariff rates change.

 How can professional estimating services help contractors manage tariff-related cost risk?

A professional estimating service that updates its cost databases regularly and maintains current supplier pricing for tariff-affected materials gives contractors accurate, current numbers on every bid rather than relying on historical database prices that may be 15 to 30 percent understated for the most affected materials. This is one of the most direct ways to avoid bidding below cost on materials that have moved significantly in the last 12 months.

The Virtual Estimation provides professional construction cost estimating services for general contractors, subcontractors, developers, and institutional owners across the USA, Canada, Australia, and UK. Our estimates use current RSMeans data and current supplier pricing for tariff-affected materials including structural steel, copper, aluminum, and lumber. Turnaround is 24 to 48 hours. First-time clients receive 30 percent off. Submit your drawings today for a fixed-fee quote.